Private versus Socialised Health Care
Author: Johan BiermannDate: 21 November 2008

A well-functioning socialised (public) health system has never existed. The socialised health systems of wealthy countries such as Great Britain, Sweden and Canada battle with escalating costs, limited funding, waiting lists, ration care, and restrict patient choices. This has not diminished the belief, even in South Africa, that taxpayer funded, government-provided health-care systems are cheaper, offer better care and treat all citizens equally. 

Worldwide, countless studies are undertaken in pursuit of finding the magic formula that will enable socialised health systems to actually deliver on their promises. But, patients who suffer from life-threatening illnesses do not have the luxury of waiting on the outcomes of even more studies, nor can they wait for programmes aimed at rectifying the inadequacies of socialised care.

Under socialised health care, governments inevitably impose price controls, limit access to prescription drugs and the latest medical technologies, ration procedures such as heart and kidney transplants, control the number of hospitals and beds, and cut health-care budgets. This results in millions of patients on waiting lists going untreated, or being treated with old and outdated medical technologies.

The problems characteristic of public health systems are absent from private health care. The evidence is that the greater the extent of competition and choice in a country’s health system, the better the health system performs. As a result, countries such as Sweden and Slovakia have introduced reforms by allowing competition and choice and by no longer relying on the state to do everything. The British National Health Service (NHS) has awarded contracts to private health-care companies, including South African hospital groups, to improve delivery and reduce waiting times.

Studies by the Brussels based Health Consumer Powerhouse, which rate health systems according to a series of indicators of their consumer-friendliness and quality of care, reveal that the European Union countries that rate best, Austria, Netherlands, France, Switzerland and Germany are those having a multitude of insurance organisations, which are organisationally independent of health-care providers. In these countries citizens choose between different insurance providers, which in turn do not discriminate between health-care providers who are private for-profit, non-profit or public.

Lower ranked countries, which include the United Kingdom, and former communist states such as Poland, Bulgaria and Latvia, which are at the bottom of the rankings, have highly socialised systems in which government, or a government created agency, both finances and provides health care. In these countries waiting times are longer, access to new medicines is rationed more strictly, usually due to the lower levels of funding, and patients are less satisfied with the services they are offered.

The findings are consistent with economic history that shows that the level of economic development and human welfare achieved under government control and direction of economic activity falls short of that achieved under the private ownership and direction of the means of production.

Thus, the greater the role of government in the funding and provision of health care, the more likely there will be waiting lists for medical procedures, denial of care to the elderly and limitations on the availability of medical technology, as experienced in Canada and the United Kingdom. Countries that allow competition and private funding and delivery of health care experience fewer problems than those that do not.

The failures of public health systems are inherent in the socialisation (government ownership and/or control) of any form of economic activity. Ensuring that patients have access to medicines and life-saving services requires that health services delivery be organised in the same way as all other successful economic activities, which means introducing economic freedom in health-care provision.

Doctors, hospitals, pharmaceutical companies, and developers of high technology medical equipment are not exempt from the laws of economics, neither is government. There is accordingly no compelling reason why government should be the provider and funder of health care. Supplying the heath-care requirements of patients is best left to competing private providers. Other than applying the general laws against fraud and other misdemeanours to protect patients, governments should refrain from interfering with and controlling private health-care provision.

The question arises: what happens to the poor and indigent under a private health-care dispensation? While the historical evidence shows that private philanthropy, charitable foundations and religious groups will take care of the poor, this will not happen overnight. The solution is for government to purchase care for the truly needy from competing private providers. At the same time, restructuring government tax policy to encourage provision of care to the poor and indigent by charities, including charitable provision by private health-care providers, would contribute towards ensuring care for them.

Despite its popularity, and contrary to popular belief, socialised health care does not mean caring, sharing and compassion in the delivery of health care. It means government ownership and/or control over health-care provision. A private health system does not mean greedy health-care providers intent on exploiting the sick. It means private ownership, control and provision of health care goods and services.

The evidence that privately provided goods and services are superior to those provided by government is there for all to see. Private health care is no exception.

Author: Johan Biermann is a planner and policy researcher. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

HPU Feature Article / 18 November 2008